Zee Entertainment Enterprises (ZEEL) will announce its December quarter earnings on Tuesday. The quarterly result comes on the heels of the company’s deal with Sony falling apart, followed by a litany of cases filed against each other.

Ahead of the results, the Zee shares fell over 4% to the day’s low of Rs 180.

The Subhash Chandra-promoted company had reported a 9% growth in its consolidated net profit for the July-September quarter at Rs 123 crore compared to Rs 113 crore in the same quarter last year. The operating revenue in Q2 rose 20% year-on-year (YoY) to Rs 2,437 crore.

The company had clocked 6% growth in its consolidated EBITDA to Rs 333 crore in the July-September period. EBITDA margins came in at 13.6% in the same period, down from 15.6% a year ago. Segment-wise, advertising revenues fell 3% YoY to Rs 979 crore, while subscription revenues jumped 8% YoY to Rs 888 crore. Revenue from other sales and services more than tripled YoY to Rs 571 crore.

Zee received communication from Sony to terminate the merger and the latter is seeking a termination fee of $90 million on alleged breaches by Zee.

Following the Sony action, Zee refuted various alleged breaches of obligations about the merger cooperation agreement and replied to Sony saying that its claim of $90 million in damages was untenable. It also initiated steps to counter Sony’s claims at the arbitration proceedings initiated at the Singapore International Arbitration Centre (SIAC). Zee further moved the National Company Law Tribunal (NCLT), which had approved the scheme of merger, asking for the implementation of the same.The stock has fallen 22% since the cancellation of a $10 billion mega-merger deal last month with downgrades from several top brokerages. Global broking firm CLSA downgraded the stock to sell rating and had then warned investors that a valuation de-rating could be in the offing.”With the merger terminated, Zee’s valuation will likely decline to 12x PE levels (Aug-21) seen prior to the merger announcement. The stock had de-rated in the past during the promoter share pledging crisis (in 2019) and fall in business cash conversion,” CLSA’s Deepti Chaturvedi and Saurabh Mehrotra had said.

Nuvama also reduced its FY25E/26E EPS on Zee by 16%/24% and downgraded the stock to reduce rating with a target price of Rs 190. Elara has downgraded Zee to sell with a target price of Rs 170 while Motilal Oswal has also downgraded the stock to neutral with a target price of Rs 200.

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